Amid Republican efforts to insulate banks from lawsuits, Democrats are hoping to grill Wells Fargo executives about recent developments in the bank’s fake accounts scandal.
Every Democrat on the Senate Banking Committee sent a letter on Tuesday to Mike Crapo (R-Idaho), the panel’s chair, asking for a hearing featuring Wells CEO Timothy Sloan and the chair of the bank’s board of directors, Stephen Sanger.
The move comes just days after Wells “admitted that it signed up hundreds of thousands of its auto loan customers for insurance without their consent,” as the senators noted. The New York Times reported last week that the practice led to 274,000 delinquencies and “resulted in almost 25,000 wrongful vehicle repossessions” from 2012-2016.
Senate Democrats’ entreaty also comes days after the House passed legislation that would stop the implementation of a Consumer Financial Protection Bureau rule fighting banks’ efforts to get out of being sued, through the use of fine print in contracts.
The CFPB regulation would prevent banks and credit card companies from including so-called “forced arbitration clauses” in customer agreements. The strategy is used to force consumers into private dispute settlement and to undermine class action lawsuits.
Crapo has introduced an identical bill in the Senate that has thirty cosponsors — all Republicans. Democrats bemoaned this push in their letter, pointing out that Wells used forced arbitration clauses to keep the lid on its fake accounts scandal.
Last September, Wells Fargo was fined $185 million by a number of regulators, including the CFPB, for opening up to 2.1 million accounts without customers’ authorization. The bank admitted to the wrongdoing from 2011-2015, amid corporate efforts to boost sales targets.
“Customers first sued over these accounts in 2013, but Wells Fargo then forced them into secret arbitration proceedings, keeping this scam under wraps and blocking consumers from any relief,” Sen. Sherrod Brown (D-Ohio) said on Monday, in defense of the CFPB rule.
“And they’re still using these forced arbitration in their contracts,” Brown added, “including the contracts in their auto loans scam.” The lawmaker is the ranking Democrat on the Senate Banking Committee.
Another member of the committee, Sen. Elizabeth Warren (D-Mass.), reacted to the Wells auto insurance news last week by calling on the Federal Reserve “to invoke its legal authority” to sack the bank’s board of directors.
“As you know, Federal Reserve regulations and guidelines impose clear risk-management obligations on bank board members,” Warren told the central bank’s chair, Janet Yellen.
“If board members fail to fulfill those obligation, the Federal Reserve may remove them,” the senator added, citing special Dodd-Frank rules for the largest and most complex financial institutions.
In their Tuesday letter, Democrats lined up a number of other developments in the fake accounts scandal since ex-Wells CEO John Stumpf last testified before the Senate Banking Committee. Stumpf resigned weeks after news of the phony accounts broke.
News stories cited by the Dems included a piece about the fake accounts potentially impacting more than 2.1 million people, the bank’s targeting of undocumented immigrants, and efforts by Wells managers to retaliate against whistleblowers.
Whether or not Crapo acquiesces to the request to hold the hearing, it isn’t likely that Republicans will move this month to pass the CFPB rule repeal.
Senate Majority Leader Mitch McConnell (R-Ky.) did not cite the legislation on Tuesday, when outlining Republicans’ agenda before recessing for the end of summer.
A Republican staffer told Morning Consult that “supporters of the resolution do not have the votes needed to proceed on the floor, given the absence of Sen. John McCain (R-Ariz.).” The senator is back in his home state receiving treatment for brain cancer.
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